17 February 2009 - A surprise drop in coffee prices late last year has left some Costa Rican coffee millers in the lurch, forcing them to sell the crop below cost and raising fears of shutdowns if prices fall further.
The CoopeSabalito coffee cooperative, close to the border with Panama, paid farmers high prices in advance for coffee cherries harvested at the end of last year, but now it has to sell the processed beans to roasters at a much lower price.
"(Our situation) is quite critical, both in terms of the high cost of production and financing difficulties," the cooperative's president Hernan Murillo told Reuters.
The cooperative bought coffee from its more than 200 associated farmers before the financial markets collapsed, pulling down commodities prices.
The March arabica coffee contract slipped from a high of $1.60 per pound in July to around $1.12 this month.
The coop paid out more than it is getting back and is now worried about its own survival.
Small farmers in the area around the small town of San Vito de Coto Brus depend on the cooperatives to buy their crops and extend loans.
"Everyone hopes that (the coop) does not disappear because it would hurt the town," said coffee farmer Marcos Salazar.
Coffee millers in the lush mountains of southern Costa Rica are in a tighter spot than elsewhere in Central America because they are the first region to begin harvesting and depend heavily on March delivery contracts.
CoopeSabalito's main buyer is Starbucks, which recently announced it would be selling instant coffee in a wave of cutbacks and price slashing for customers whose pockets have been pinched by the economic slowdown.
COFFEE CRISIS MEMORIES
Costa Rica's high-quality beans usually fetch a premium from buyers like Starbucks over other varieties but heavily indebted farmers say the slumping prices are forcing them to cut back on farm improvements and fertilizers.
At the nearby Cooprosanvito cooperative, which also groups hundreds of farmers, the low prices will make it difficult for the cooperative to extend more loans to its members, manager Leopoldo Nunez said.
"Cooprosanvito will have to tighten its belt with regards to loans because if the farmers don't have sufficient collateral, we cannot provide credit," Nunez said.
The sector's troubles are being noticed by local authorities, who remember the dark days of the coffee crisis at the beginning of this decade when prices nose-dived to as low as $0.40 a pound and many farmers were forced out of business.
The country's Agriculture Minister, Javier Flores, said Costa Rica is discussing measures to give support to struggling cooperatives through government loans.
Just a few kilometers down the road from Cooprosanvito and CoopeSabalito in the town of Agua Buena, there is another cooperative that went bust in 2006 after prices collapsed.
The mill's machinery stands rusted and idle, and the productive coffee farms that once ringed the town are now pasturelands.
Nunez said he is bracing for at least one cooperative or privately held processing firm in the area to meet the same fate as the Agua Buena plant if prices continue to slipping.